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NSW Long Service Leave Act – Summary

Scope of Act

The Act applies to all award/agreement covered employees and also award/agreement free employees in New South Wales, i.e. weekly, part-time and casual employees.

The Act does not apply to employees covered by a Federal long service leave award; a Federal agreement dealing with (or excluding) long service leave; employees entitled under any award or agreement to long service leave more favourable than the Act; employees entitled to long service leave under any other Act such as employees covered by the Building & Construction Industry Long Service Payments Act, who elect to receive benefits available under that Act instead of the Long Service Leave Act, and the Long Service Leave (Metalliferous Mining Industry) Act.

From 1 January 2010 this situation is preserved by the National Employment Standards but there are special rules where agreements exclude long service leave or apply a single standard across more than one state and/or territory.

Entitlement to Leave

An employee whose service with an employer began after 1 April 1963, the employee is entitled to 2 months' leave for 10 years service. Further long service leave of 1 month accrues after each 5 years of service. A month is defined in the Act as 4 1/3 weeks (see table).

An employee whose service commenced before 1 April 1963, is entitled to 3 months' leave for 20 years service up to 1 April 1963, then 2 months' leave for 10 years service after 1 April 1963 (see table).

Payment for Leave

"Ordinary pay" for the purposes of long service leave means:

Fixed Pay Rates

The amount of the ordinary pay of the employee as on the date of taking leave; or

The average amount of the ordinary pay which was earned by the employee during the period of 5 years ending on the date of taking leave, whichever is the greater.

Ordinary pay does not include payments made in respect of shift work, overtime or other penalty rates. Where no normal number of weekly hours is fixed under the terms of the employee's employment, the normal weekly number of hours is the average weekly number of hours worked by the employee during the period of 12 months or 5 years, as the case may require, ending on the day of taking leave.

Other Than Fixed Rates

Where an employee is paid otherwise than in relation to a fixed pay rate, ordinary pay is the average weekly wage earned by the employee (excluding shift work, overtime or other penalty rates) during the period actually worked by the employee during:

a period of 12 months; or

the period of 5 years, ending on the date of taking leave.

Bonuses, Incentives, etc.

Where an employee has earned any amount under a bonus, incentive or other similar scheme the employee's ordinary pay shall be increased by the average amount of bonuses, etc. received by the employee during the period of 12 months, or 5 years before taking the leave, as the case may be. From 1 September 2005 bonuses received by an employee are not to be taken into account if the ordinary annual pay of the employee (excluding bonuses) exceeds $144,000.

"Bonus" means any amount received under any bonus, incentive or other similar scheme, but does not include any amount taken into consideration in determining the average weekly wage of an employee on "other than fixed pay rates".

Board & Lodging

Ordinary pay also includes the cash value of board and lodging provided by the employer and where the cash value is not fixed under the terms of employment then it shall be computed at the rate of $15 per week for board and $5 per week for lodging.

Workers' Compensation

Workers' compensation legislation in NSW prescribes that compensation is payable notwithstanding that the employee is entitled to receive any payment for long service leave. This means that during a period of long service leave, an employee will receive workers' compensation payment from the insurer in addition to long service leave pay from the employer.

Payment on Termination

Where an employee has served at least 10 years' service with an employer, on termination the employee is paid long service. The payment becomes due irrespective of which party terminates the service or for what reason. In calculating the amount due for service in excess of 15 years, only whole years of service are counted.

An employee with less than 10 years' service with an employer is not entitled to pro rata long service on termination unless the employee's services are terminated:

By the employer for any reason, other than serious and wilful misconduct.

By the employee on account of illness or incapacity, or domestic or other pressing necessity;

and the employee has at least 5 years' service with the employer.

An employee with less than 5 years' service has no entitlement to pro rata long service leave.

Death of an Employee

Assessment of long service leave entitlements on the death of an employee would be determined in the same manner as if the employment was terminated by the employer. Upon request by the deceased employee's representative (the executor or administrator of the employee's estate), the employer shall pay to that representative ordinary pay for any long service leave which had accrued at the date of death.

Continuous Service

Prior to 9 May 1985 entitlement to long service leave depended on service for the appropriate period (i.e. at least 5, 10 or 15 years according to the circumstances) with the one employer, under an unbroken contract of employment.

As from 9 May 1985 to qualify for leave, service with an employer means continuous service, whether on a permanent, casual, part-time or any other basis under one or more contracts of employment.

Generally, all absences count towards the accrual of long service leave. However, certain interruptions are not to be taken into account when calculating the period of long service. These are:

Parental leave, i.e. maternity leave, paternity leave, adoption leave

Absence by leave of the employer, i.e. leave without pay

The period during which the employee was not employed, where the employee is terminated by the employer and re-employed within 2 months

The period during which the employee was not employed, where the employee was terminated by the employer due to slackness of trade, and subsequently re-employed at a later date

Any absence arising directly or indirectly from an industrial dispute.

Transfer of Business

Where a business is transferred as a going concern from one employer to another and there is no other break in the employee's continuity of service, then service with the first employer is to be regarded as service with the second employer in computing leave due to the employee.

The Act provides that an employee's service shall be regarded as continuous even when that employee has been employed by different subsidiaries of a single holding company, provided that the employee has within 2 months after the termination of the service of the employee with the first employer entered into a contract of employment with the other related employer.

Where an employee has entered into a contract of employment within 12 months after the completion of an apprenticeship with that employer, the period of the employee's apprenticeship shall be taken into account in ascertaining the period of service.

Taking of Leave

Leave which accrues to an employee should be taken as soon as practicable, having regard to the needs of the employer's establishment. The employer shall give at least 1 month's notice of the date from which it is proposed that the employee's long service leave shall be given and taken. If an agreement to postpone is made, it may be agreed also that the rate of pay to be applied when the leave is taken is the rate the employee was receiving at the date the agreement was entered into.

Unless the employer and employee agree, leave which accrues to an employee must be taken in one continuous period. If by agreement accrued leave is taken in more than 1 period it shall be taken in the following separate periods and not otherwise:

where the amount of the leave is 2 months, in 2 separate periods;

where the amount of the leave exceeds 2 months and does not exceed 19 1/2 weeks, in 2 or 3 separate periods;

where the amount of leave exceeds 19 1/2 weeks, in 2, 3 or 4 separate periods.

Long service leave is exclusive of annual holidays but where a public holiday falls within a period of long service leave the period of leave shall be extended by 1 day for each public holiday that occurs.

Payment may be made in full at the beginning of the leave or at the same time as the employee's ordinary pay would have been paid if the employee had remained on duty, or in any other way that may be agreed. If payment is not made in full at the beginning of the leave, the employee may require that the payments be made by cheque sent to a specified address.

Leave in Advance

Where the employer and employee agree, a period of at least 1 month may be taken wholly or partly in advance. Where the long service leave is taken in advance and the employment is terminated by either party, the deduction to be made from any pay due to the employee on termination is calculated as follows:

If the employee has not become entitled to any long service leave on termination of employment, the amount paid to the employee as ordinary pay for the leave taken; or

If the employee had become entitled to leave - the amount paid to the employee as ordinary pay for the excess if any over the employee's total entitlement of the period or total periods of long service leave on ordinary pay given and taken;

The deduction to be made shall not exceed the amount of ordinary pay that would have been payable for the period of leave or excess leave as the case may be, had it been taken on the termination of the employee.

The effect of this is that if, upon termination, long service leave taken in advance exceeds the employee's entitlement, the employer may make a deduction (from any moneys owed to the employee) in relation to the excess leave taken in advance.

This deduction shall be the lesser of, firstly, the amount of ordinary pay actually paid to the employee at the time the excess leave was taken, or secondly, the amount of ordinary pay which would have been payable if such leave had been taken on termination.

Penalties

The Act prohibits the making of payments in lieu of long service leave except on termination of employment.

The Act provides for a maximum penalty of $2,200 for a breach of any provision of the Act.

Records

Records must be kept and must show the full name and address of the employee, the dates of commencement and termination, the dates on which the employee becomes entitled to each amount of leave and the dates on which payments are made in respect of that leave is taken, the date of payment and amount paid on termination or death.

Taxation

Where long service leave is taken by a continuing employee, income tax deductions should be made at the appropriate normal weekly rate.

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